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Pfizer Problems Emblematic of Industry Obstacles

The decision by Pfizer, the world's largest pharmaceutical company, to abandon work on a promising cholesterol drug has some analysts wondering whether the industry can continue to grow at the same pace.

Pfizer announced over the weekend that it was halting work on torcetrapib, a new drug that it hoped would treat heart disease by raising levels of HDL, or good cholesterol. An independent safety board found the drug was actually increasing deaths in trial patients.

This isn't the first time a promising blockbuster drug has blown up on its way to the market. But in this case, the failure of torcetrapib points to problems not only at Pfizer, but for the drug industry overall.

Pfizer had been counting on torcetrapib to replace the earnings from its cholesterol lowering drug Lipitor, which now accounts for 50 percent of the company's earnings. Lipitor loses patent protection in 2011.

Analyst Jami Rubin of Morgan Stanley says the loss of torcetrapib is devastating.

"Basically, we think Pfizer now is unlikely to show any organic or top line growth, meaningful growth for another ten years," Rubin says.

Cardiologist Eric Topol of Case Western Reserve University in Cleveland says it's difficult for the pharmaceutical industry to find a drug that adds meaningful new benefits for someone who is already taking four or five drugs a day, including aspirin, a statin and a blood thinner.

"I really think that the opportunity to develop a drug to be used in tens of millions of people like statins, the chance for that in patients with heart disease, is incredibly remote in the years ahead," Topol says.

In fact, analyst Richard Evans says the demise of torcetrapib could actually raise costs and delay new HDL drugs, since the FDA may be looking closer now at other drugs in this class.

"I think the agency is going to require longer trials and these are going to be more expensive than what the industry otherwise could have had to do," Evans says.

That closer scrutiny could be justified according to analyst Tim Anderson of Prudential Securities, who says pharmaceutical companies could be now testing riskier drugs in order to come up with the next best seller.

"You're looking at a drug industry that for the last six years has been pretty desperate to get new products to market," Anderson says. "And companies, because of their desperation -- they're more willing to move riskier compounds into later stages of development because essentially that's all they have."

The pressure to develop new drugs comes at the same time companies must deal with declines in the growth of drug usage, insurance carriers who want to keep prices in check, and the federal drive to keep Medicare prices down.